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The Interaction of Tax Exemptions and Individual Tax Reform Preferences

Author

Listed:
  • Barbaro, Salvatore

    () (University of Mainz)

  • Suedekum, Jens

    () (Heinrich Heine University Düsseldorf)

Abstract

The individual voting behavior on the abolishment of single income-tax exemptions crucially depends on how strongly agents are affected by other deduction possibilities that are not at stake in the reform plans of the government. The interactions depend (i) on the shape of the tax schedule, and (ii) on how the government wants to use the revenue that is generated by the cut of tax privileges. If government plans to increase redistribution in form of lump-sum transfers, then the political chances of a tax reform increase with the existence of other deduction possibilities under progressive taxation. With proportional taxation and a budget-enlargement policy, the voting decision depends only on the particular tax privileges at stake. Matters are different if the government wants to adopt a revenue-neutral tax-cut-cum-base-broadening policy. Except for strong progression, it is less likely that an agent supports the elimination of tax privileges the stronger she is affected by other exemptions in the back.

Suggested Citation

  • Barbaro, Salvatore & Suedekum, Jens, 2005. "The Interaction of Tax Exemptions and Individual Tax Reform Preferences," IZA Discussion Papers 1543, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1543
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    References listed on IDEAS

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    1. Kai A. Konrad, 2004. "Inverse Campaigning," Economic Journal, Royal Economic Society, vol. 114(492), pages 69-82, January.
    2. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
    3. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
    4. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    5. Harms, Philipp & Zink, Stefan, 2003. "Limits to redistribution in a democracy: a survey," European Journal of Political Economy, Elsevier, vol. 19(4), pages 651-668, November.
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    Cited by:

    1. Barbaro, Salvatore & Suedekum, Jens, 2006. "Reforming a complicated income tax system: The political economy perspective," European Journal of Political Economy, Elsevier, vol. 22(1), pages 41-59, March.

    More about this item

    Keywords

    income tax reform; public choice;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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